KBB, Autotrader Report Strong November Unit Sales
Autotrader and Kelley Blue Book reported stronger-than-expected auto sales during the month of November. The overall industry health is looking strong, but the two firms noted several risk factors that could negatively impact the industry as it heads into 2016.
IRVINE, Calif., and ATLANTA — Autotrader and Kelley Blue Book reported stronger-than-expected auto sales during the month of November. The overall industry health is looking strong; however, there are a few risk factors that are worth paying attention to heading into 2016, analysts said.
The stronger-than-expected unit sales during November were driven by higher employment rates, a recovering economy, cheap gas prices, cheap credit, and successful year-end promotions, analysts noted.
“I think the holiday and Black Friday promotions generally resonated with consumers and we’ll see that trend continue through December,” said Michelle Krebs, senior analyst for Autotrader. “A notable exception that didn’t’ really resonate with consumers so much was the Ford Friends and Neighbors campaign.”
Ford has since canceled the campaign and plans to replace it with a more conventional year-end incentive. Krebs explained that while the campaign increased showroom traffic, not enough of that traffic translated into sales. Dealers told Autotrader that many customers who were aware of Ford's Friends and Neighbors campaign thought they could do better looking elsewhere.
Autotrader and Kelley Blue Book’s original forecast predicted a SAAR of 17.8 million units after November. Most major manufacturers that have reported November sales put the SAAR at 18 million units, with the possibility of the SAAR reaching 18.2 million. That depends on the performance of manufacturers that had yet to report November sales, they told the two firms.
“Usual suspects continue to do very well,” said Alec Gutierrez, senior analyst for Kelley Blue Book. “As far as the industry is concerned, month over month, very similar trends in terms of what segments are doing well: trucks and SUVs.”
Nissan was up 4% from last year, while GM and Ford came in under their forecasts. The two domestics did report solid truck and SUV sales, however. An increase in incentives was responsible for the 20% sales increase realized by the Jeep brand, according to analysts.
While great for moving vehicles, the trend of rising incentives outpacing rising transaction prices was one of the risk factors identified by KBB's Guiterrez. “In fact, while we did see a year-over-year increase in terms of what consumers are paying for new cars at the dealership, we have seen that growth start to slow,” Gutierrez noted. “Typically, we see 2-3% growth in transaction prices, but in November, that growth was coming in at less than 1%, so some stabilization happening there.”
While transaction price growth seems to be halting, incentives seem to be increasing. For the past four months, industry-wide incentives have averaged around $3,100, Krebs said.
“That’s the highest we’ve seen since prerecession,” said Krebs. “More importantly, the incentives are taking a bigger share of the average transaction price … the average transaction prices are increasing, but not at the torrid pace they were.”
Krebs also pointed to rising interest rates as another risk factor, saying the firm expects the Federal Reserve to increase interest rates later this week. While the increase will likely add only a couple of extra dollars to the typical car loan, it could have a major impact on other household loans. And that could push potential car buyers out of the market, she said.
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